Despite having multiples way above those of peers in an economy expected to cool down amid Fed rate hikes, Costco Wholesale Corporation (NASDAQ: COST) continues to be a BUY.
To benefit from rising consumer spending in the US, COST is set to draw more foot traffic to the stores backed by its plans to strengthen the supply chain, further leveraging its strategy of being the price leader in the industry. With COST’s strategic objective of ‘low margin, high volume retailing’ unchanged for the year ahead amid cheaper gasoline prices at its stores despite rising global oil prices could further boost its growth in comparable sales.
‘No frills’ service to the retailing
Just as budget airlines were a game changer in air travel, COST revolutionized the retail business with its ‘no-frills’ service in selling merchandise in bulk quantities at cutthroat prices becoming the second largest retailer in the US with a growing network of 762 warehouses operating in 10 international markets. While plans are afoot to expand international operations further, the US with a contribution of 72.2% to the turnover as of FY18 still generates the lion’s share of COST’s top-line.
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